July 28, 2006

CBOT Soy Outlook on Friday: Up 2-4 cents; weekend heat, overdone ideas

Soybean futures on the Chicago Board of Trade are seen starting Friday's open outcry session on firm footing, taking its lead from e-CBOT trade, as the market adds some premium ahead of stressful weekend heat and overdone ideas.

Soybeans are called to open 2 to 4 cents higher.

In e-CBOT trade, November soybeans were 3 1/2-cents lower at US$5.99 1/4 per bushel.

Prices have dropped significantly in the past couple of weeks, and with intense Midwest heat on tap for the weekend, the market is poised for a minor bounce, with pre-weekend positioning and end of the month evening up supportive features, analysts said.

November soybeans have dropped 47 1/2 cents from the July 11 high of US$6.39 1/2 to Thursday's session low of US$5.92.

The market continues to weigh the merits of recent rains ahead of stressful heat, which should promote some consolidative short-covering heading into the weekend, said a CBOT commission house broker.

However, technical weakness and ample U.S. supplies is promoting downside pressure, but traders will keep a close eye on weather forecasts amid the uncertainty of weather models for conditions for mid to late next week in the Midwest.

Market technicians said prices for the November contract have moved down into the lower portion of a wide trading range over the past six months. There is a very strong technical support zone located between US$5.85 and US$5.92, and that support zone has produced solid price rebounds on three occasions since January, analysts said.

The next downside price objective is closing prices below solid support at the June low of US$5.91, and it will take a close above solid technical resistance at this week's high of US$6.14 1/2 to provide some fresh upside technical momentum.

First resistance for November soybeans is seen at US$6.00 and then at US$6.05 - Thursday's high. First support is seen at US$5.92 - Thursday's low - and then at US$5.91.

The DTN Meteorlogix Weather Service forecast said Friday's U.S. and European models are in fair to good agreement during the next 3-5 days, but there is a high degree of uncertainty during days 6-10.

Meanwhile, another surge of fairly hot weather appears likely for the western Midwest during a 3-5 day period. Scattered thundershowers are on tap with temperatures turning cooler by about the middle of next week, Meteorlogix forecasts. Recent thunderstorm activity has helped to ease stress to crops in west-central Illinois but more rain is still needed. The next chance for rain in the eastern Midwest doesn't come until early in the 6-10 day period, while temperatures in the mean time turn quite hot, Meteorlogix reports.

U.S. Midwest cash soybean basis bids are mostly unchanged Friday, cash dealers said. Spot cash soybean bids were up 10-cent in Bloomington, Ill., according to cash sources Friday.

Rotterdam soybeans and soymeal prices were mostly lower. European vegoils were mixed.

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled lower Friday on oversupply and CBOT losses, an analyst said. The benchmark September contract settled RMB37 lower at RMB2,370 a metric tonne, after trading between RMB2,354/tonne and RMB2,389/tonne.

Crude palm oil futures on the Bursa Malaysia Derivatives ended sharply higher Friday, moving the third-month contract above the key MYR1,600/tonne level and putting the market on track for further gains next week. The benchmark October contract ended at MYR1,620 a metric tonne, up MYR46 from Thursday.